Ambiguous GST rules hit Indian businesses

GST was launched on 1st July with the one and only aspiration to consolidate this 2 trillion economy and make business easy across state borders. But it has been a month and we have observed that businesses are still struggling hard to adopt this new tax system. Due to lack of pre-GST training and awareness, business houses find it difficult to price their products with complex GST tax slabs. It has hurt the sales and depressed the economic growth along with low sales. This article will discuss how GST is confusing the Indian business scenario.

Pricing products is a hard business for SMB’s

An ideal GST system generally favors single rate for one country. But in the case of India, GST has embraced the sub-continent with four tax slabs and small and medium entrepreneurs are finding it difficult to understand and take up the new system. Many industries are facing the confusion for different tax slabs; e.g. the airlines are confused whether to levy a tax on the economy or business class at 5% to 12%. Similarly, the auto repair shops are facing problems as 28% GST is levied on automobile spare parts. In addition to this, desktops attract 18% GST while printers as well as monitors are taxed with 28% GST rate. Thus, it has become a serious problem for importers as various parts of computers are imported as a single unit.

Compliance problems with small entrepreneurs

Small business houses run on the manual process of bookkeeping for account records. While the GST is making the tax filing process digital, it has become a hardship for the small scale businesses. They find it difficult and costly to build a digital infrastructure along with hiring an accountant. Thus, GST has become a costly affair for such small scale business houses.

Fraud in applying tax

In this already clumsy process of GST, many business houses are taking the advantage of poor GST awareness of the citizens. News is on the air that many landlords are demanding extra taxes from the tenants in the name of GST while real estate sector is kept out from the new tax regime. In addition to this, it is reported that many tour operating companies are applying taxes not only services provided inside India but also outside the country.

Stock market crash of cigarette makers

Tobacco companies with only 28% GST rate were enjoying a strong profit. Post government increased 5% additional GST on 28% making it 33%, it fixed the inconsistency of the GST structure. With this tax increase, many tobacco farms are losing billions of money due to stock market crash.

Winding up

Various researches reveal that 40% small businesses in India still have no clue how GST works and two-third of them yet to comply with the new structure. As per prediction, GST was supposed to speed up the economic growth by 2% of the third largest economy in Asia. But such growing pullbacks is still keeping the future of GST at stake. Although the government has introduced a tax crash course to educate the companies about GST, the Indian economy is going face the biggest test in September as the GST filing grace period will be over.